It is widely believed that many people today are familiar with the term passive income, which translates to generating income without active work. Everyone desires to become wealthy easily, without hard labor, enjoying life with more free time, and retiring from work sooner to achieve financial independence that enhances their lifestyle. One of the most consistently attractive forms of passive income generation across all eras is investing in real estate for rental purposes, particularly in condominiums. Not only can these properties be used personally, enhancing the owner's status and appeal, but they can also yield better returns, especially in a time when deposit interest rates are at rock bottom, leading to global turmoil in the search for high-yield investments.

For this reason, many aspire to become wealthy quickly through real estate investments. However, in reality, while real estate investment has numerous advantages, it also comes with various disadvantages, such as limited liquidity, immobility, property deterioration, and the long duration required for investment returns. These factors necessitate a thorough understanding of investing in such assets, especially now that many people share the same goal of generating passive income from real estate, which increases competition and makes rental prospects more challenging every day, leading to price wars and a less optimistic rental market.

If we calculate the rental yield percentage, it may be observed that currently, after deducting all expenses, condominium investors might achieve a net return of around 5-6%, which is considered quite good. If we consider the payback period from rental income, it could take as long as 20 years to recoup the investment.

When comparing data from certain countries with rental yields of only 2-3%, it becomes evident that the current situation may signal the beginning of a decline in condominium investment returns. In 5-10 years, it is possible that no one will see a return of 5% again, similar to the historical rental yields that once reached 10%.

Moreover, careful consideration is required when investing in projects that guarantee tenants and returns, assessing whether, after the guarantee period, investors can still find tenants independently, achieve the previously guaranteed returns, and maintain this for 20 years.

Thus, it becomes clear that the idea of having tenants help pay off the condominium mortgage, making it seem almost free, may not be worth the associated risks and may not be suitable for the current situation.

In summary, it can be seen that generating passive income from investing in real estate, such as condominiums for rental purposes, may not be the best tool for achieving wealth without initial capital at this time, due to significantly lower returns compared to the past, fierce competition, and risks from rapid technological changes (technology disruption) that can instantly alter demand.

However, investing in generating passive income from condominiums is likely to remain a strong hedge against inflation in the long term, as well as providing income that exceeds bank deposit interest rates, rather than focusing on quick wealth or financial independence in the short term.

Assoc. Prof. Dr. Niti Rattanapreechawech, Director of the Real Estate Business Project, Faculty of Commerce and Accountancy, Thammasat University

SOURCE: www.thaipublica.org